By Barani Krishnan
Investing.com - Gold ended a rollercoaster week higher, eking out a weekly gain, as talks in the U.S. Congress for a COVID-19 fiscal stimulus package hung in the balance.
Gold for February delivery on New York’s Comex settled up $6.20, or 0.3%, at $1,843.60 an ounce. It rose 0.2% for the week, after rising $33 on Monday to a three-week high of nearly $1,880 before tumbling almost $40 in the next session.
The spot price of gold, which reflects real-time trades in bullion and which algorithms and hedge funds use to decide on immediate direction in futures, settled with a smaller gain than the February gold contract. By 3:03 PM ET (20:03 GMT), spot gold was at $1,838.61, up $1.89, or 0.1%.
Gold turned volatile as agreement for a COVID-19 economic stimulus remained out of reach.
In Friday’s negotiations, Republicans in the Senate, led by Majority Leader Mitch McConnell and aligned to outgoing president Donald Trump, continued to frustrate attempts by Democrats in the House of Representatives to add state and local aid to the package.
On their part, the Democrats, led by House Speaker Nancy Pelosi and backing President-Elect Joe Biden, are against Republican efforts to add liability protections for institutions under the pandemic.
“McConnell is not budging on liability protections and remains resistant on providing aid to state and local governments,” said Craig Erlam, analyst at New York’s OANDA. “This week was supposed to deliver a breakthrough in negotiations and not have talks get pushed into next week.”
“Gold is on firm footing despite the dollar rebound as a plethora of risk events remain in place over the next week.”
The Dollar Index hit a six-year low of 90.47 on Monday but rebounded by Friday to hover at 90.95. The dollar and gold are contrarian trades that almost always move opposite to each other.
Congress originally passed in March the Coronavirus Aid, Relief and Economic Security (CARES) Act, dispensing roughly $3 trillion as paycheck protection for workers, loans and grants for businesses and other personal aid for qualifying citizens and residents.
In the past few months, however, Democrats in Congress have been locked in a bitter debate with Republicans in the Senate on a successive relief plan to the CARES Act. The dispute has basically been over the size of the next stimulus as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid.
The stalemate appeared broken last week after a bipartisan group of Democrats and Republicans proposed a $908 billion relief bill, which led the two sides to resume negotiations.
Stimulus and other monetary expansion exercises typically fuel inflation, boosting gold, which serves as a hedge.